Good afternoon and welcome to DoubleDown Interactive's Earnings Conference Call for the First Quarter ended March 31, 2023. My name is Sean, and I will be your operator this afternoon. Prior to this call, DoubleDown issued its financial results for the first quarter 2023 and a press release, a copy of which has been furnished in a report on Form 6-K filed with the SEC and is available in the Investor Relations section of the company's website at www.doubledowninteractive.com. You can find a link to the Investor Relations section at the top of the home page. Joining us on today's call are DoubleDown's CEO, Mr. In Keuk Kim; and its CFO, Mr. Joe Sigrist. Following their remarks, we will open the call for questions. Before we begin, Richard Land, the company's outside Investor Relations advisor will make a brief introductory statement. Mr. Land.

Thank you, Sean. Before management begins their formal remarks, we need to remind everyone that some of management's comments today will be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, and we hereby claim the protection of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements about future events and include expectations and projections, not present or historical facts and can be identified by the use of words such as may, might, will, expect, assume, believe, intend, estimate, continue, should, anticipate or other similar terms. Forward-looking statements include and are not limited to those regarding the company's future plans, mergers and acquisition strategy, strategic and financial objectives, expected performance and financial outlook. Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially and adversely from what the company expects. Therefore, you should exercise caution in interpreting and relying on them. We refer you to DoubleDown's Annual Report on Form 20-F filed with the SEC on March 31, 2023 and other SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition. These forward-looking statements are made only as of the date of this call. The company does not undertake and expressly disclaims any obligation to update or alter the forward-looking statements whether as a result of new information, future events or otherwise except as required by law. During today's call management will discuss non-GAAP measures, which are believed by management to be useful in evaluating the company's operating performance. These measures should not be considered superior to in isolation or as a substitute for the financial results prepared in accordance with GAAP. A full reconciliation of these measures to the most directly comparable GAAP measure is available in the earnings release and on our Form 6-K filed with the SEC prior to this call. I would like to remind everyone that this call is being recorded and will be made available for replay via a link in the Investor Relations section of DoubleDown's website. Thank you for your patience. With that, it's now my pleasure to turn the call over to DoubleDown CEO, In Keuk Kim.

Thank you, Richard. Good afternoon, everyone. Thank you for joining us on our 2023 first quarter earnings call. Current revenue of $77.6 million was up on a quarterly sequential basis, marking our first quarterly sequential revenue increase since the peak of the COVID pandemic period. We also continued to generate consistent, attractive adjusted EBITDA margins and operating cash flow with adjusted EBITDA in the first quarter also rising on a quarterly sequential basis to $25.4 million and cash flow from operations of $19.2 million. Our solid financial results are based on the ongoing strength of our flagship DoubleDown casino, or DDC gaming app. We continue to benefit from the loyalty of DDC players, who choose to pay, which has established the foundation for our consistent financial results. As many of you know, DDC revenue is primarily driven by those who have been playing our games for several years as opposed to newly acquired players. For example, 92% of our 2022 annual revenue was generated by players who were acquired in prior years. In January, we announced a definitive agreement for DoubleDown to acquire Super Nation, which operates three iGaming sites in Western Europe. We are working towards gaining the required regulatory approvals and currently expect to close this transaction later this year. The acquisition of Super Nation will further diversify our sources of revenue by type and geography while marking our entry into the high-growth iGaming sector. This acquisition will also allow DoubleDown to leverage its core competency of creating games that entertain and engage users. In that regard, along with our M&A activities, we continue to invest in our own app development initiatives, primarily focused outside the social casino category. This includes multiple projects running in parallel that are supported by our game developers in Seoul and Seattle. During last quarter's conference call, we mentioned that a new gaming app, Spinning in Space, has reached soft launch status. While we were optimistic about the potential of this game throughout its development process and approach, the performance metrics seen during the soft launch did not meet our criteria. As a result, we have determined not to move forward with a full global introduction of the game and are refocusing related resources on other game development activities. This includes adding these resources to games that we expect to launch later in 2023. I want to highlight that our decision not to move forward with the global launch of Spinning in Space speaks to our commitment to invest capital only when we are confident that we can achieve appropriate returns. Now, I will turn it over to our CFO, Joe Sigrist, to walk you through our financials before providing my closing remarks.

Thank you, and good afternoon, everyone. Our revenues for the first quarter of 2023 were $77.6 million, compared to $85.5 million last year. However, as IK mentioned, Q1 revenue increased sequentially from the fourth quarter of 2022, primarily driven by an increase in DoubleDown Casino revenue. KPI highlights for the company include average revenue per daily active user or ARPDAU increased to $1.03 in Q1 2023 from $0.97 in Q1 2022. The payer conversion ratio, which is the percentage of players who pay DoubleDown, also increased to 5.8% in Q1 2023 from 5.5% in Q1 2022. Average monthly revenue per payer decreased from $225 in Q1 2022 to $221 in Q1 2023. Total operating expenses decreased from $60.8 million in the first quarter of 2022 to $52.2 million in the first quarter of 2023. The decrease was primarily due to lower cost of revenue, decreased marketing expenses, and lower depreciation expense. Sales and marketing expenses for the first quarter of 2023 were $16.0 million, a 19% reduction compared to Q1 2022, and 5% lower on a quarterly sequential basis. We believe that our advertising efforts to acquire new players, the primary cost component in our sales and marketing expenses, will remain fairly flat over the next couple of quarters, inclusive of our decision not to proceed with the Spinning in Space global launch. It is also worth noting that depreciation and amortization expense has been less than $100,000 in the last three quarters, a significant decline from prior periods due to the completed amortization of certain identifiable intangible assets for which we used purchase price allocation at the time of the 2017 DoubleDown Interactive acquisition. Net income for the first quarter of 2023 was $23.7 million or $9.55 per diluted share and $0.48 per ADS, an increase from net income of $18.5 million or $7.46 per diluted share and $0.37 per ADS in the first quarter of 2022. The increase was primarily driven by lower marketing and depreciation and amortization expenses. Adjusted EBITDA for the first quarter of 2023 was $25.4 million compared to $26.9 million for the prior year quarter. Adjusted EBITDA margin was 32.8% for Q1 2023, representing an improvement from 31.5% in Q1 2022 and 32.4% in Q4 2022. Net cash flows from operations were $19.2 million for the first quarter of 2023 compared to net cash flows from operations of $28.4 million in the prior year period. The decline is primarily due to the timing of accounts receivable payments. And finally, turning to our balance sheet. As of March 31, 2023, we had $304.8 million in cash, cash equivalents, and short-term investments compared to $285.2 million at the end of last quarter. Our total debt as of March 31, 2023, was $38.3 million. With regard to our current cash position, we expect to make the final payment for the Benson settlement of $95.25 million by the end of June, excluding cash for this payment, cash for our pending Super Nation acquisition, and our debt position. Our balance sheet currently reflects a total uncommitted cash and short-term investment position of approximately $136 million, which amounts to approximately $2.74 per ADS. This completes my financial summary. Now I'll turn it over to IK for closing remarks.

Thank you, Joe. The financial strength of our social casino platform positions us to continue to make return-focused investments in multiple areas of potential growth through both organic development and M&A. Within the core of our social casino business, our development teams are working hard to make ongoing enhancements to our flagship app DoubleDown Casino. In addition to our normal new slot launches, we are also developing new monetization features such as enhancements to our hybrid rooms to drive consistent player entertainment and engagement. In the near term, we are excited to close the Super Nation acquisition, which will allow us to quickly enter a new growth market and expand DoubleDown's gaming reach. We believe this acquisition will create strong synergy opportunities between Super Nation and DoubleDown, and we look forward to starting this work as soon as the acquisition is complete. At the same time, we are continuing to evaluate other M&A opportunities that would leverage our existing strength in game development, engineering, marketing, and business intelligence to grow our top and bottom lines. As you highlighted, we have a very strong uncommitted cash position, which combined with our ability to generate consistent high levels of free cash flow, provides the company with significant optionality to allocate capital to enhance shareholder value. We are now happy to take your questions. Sean?

Thank you. At this time, we will conduct a question-and-answer session. One moment for our first question. Our first question comes from David Bain with B. Riley. David, go ahead.

Thank you. Hi, Kim and Joe, and nice execution on the first quarter. I was hoping first you could maybe unpack, and I know maybe following up with what you were just talking about, IK on the Super Nation strategy just a little bit more maybe near-term, long-term. What's on the to-do list for the near-term synergy execution? Is it a heavy lift to incorporate your content? Any strategies immediately for customer acquisition that you're going to be implementing near-term? And then longer-term, is this something you replicate with other acquisitions similar to Super Nation or do you really just need one kind of horse or platform to potentially tackle other geographies? Just kind of a big picture roadmap on Super Nation from a strategic standpoint would be helpful?

So Dave, this is Joe. I'm going to start and let IK share his thoughts afterward. We are very excited about closing this deal and need to do some preparatory work, although not as much as we would like because we are eager to get started. I believe IK can specifically highlight the product aspects, as we see significant opportunities to integrate content and technology into their business. Additionally, from a marketing and business intelligence perspective, we have best practices that can help us acquire new users and measure the ROI of our investments, and we are keen to start sharing these insights with the Super Nation team almost immediately. That will be our initial focus for making an immediate impact. However, as you pointed out, the real potential lies in the product area. IK, perhaps you could elaborate on the content technology.

Hello, Dave, this is IK. Yes. As soon as the acquisition is complete, we will support Super Nation on the product side and marketing side as you mentioned. From a short-term perspective, we will have an opportunity to support Super Nation in the Western Europe B2C market in iGaming. But as well as a long-term perspective, we will explore our B2B business and B2C business. We understand user demographics and slot content, and how we can enhance the slot content, and we understand U.S. user demographics. So we look forward to expanding our user demographics and geography, and slot content broadly in B2C and B2B areas.

Thank you for your response. I have a follow-up regarding capital allocation. I appreciate your mention of the $100 million of uncommitted capital and its flexibility. I would like to gain a deeper technical and strategic understanding. I know you adjusted the reserve in your financials, which I believe enables dividends or buybacks under Korean law. Is there any structural barrier to convening a Board or a special meeting at any time this year, or must we wait for a year-end event? Additionally, have discussions about capital return policies become more detailed? It seems like that might be the case based on your comments, but I wanted to verify.

Yeah, sure. No, I understand. To answer the first question, you're right we did make those moves last year to ensure that we weren't beholden to any specific timing impediment, if the board chose to do something on the capital return side. And at least at this point we know of no other impediment that we would have in case the Board wanted to act quickly to do something like a buyback or a dividend. As it relates to discussions, I mean the Board's discussions are ongoing. There is definitely, certainly with what occurred with the vote on the dividend and certainly discussions that we've had with investors, a top of mind aspect to the capital return topic from a Board standpoint. And like I said, it's definitely something that's a topic that we wanted to really highlight here today.

Awesome. Thanks, In Keuk. Thanks, Joe.

Our next question comes from Jeff Henriksen with Thorpe Abbotts Capital. Jeff, go ahead.

Hey, Jeff. How are you there?

Hi, there. Can you hear me now?

Hi, Jeff. Yes, go ahead.

Okay, great. Yeah. So a couple of questions for me. Congratulations on the quarter and the return to sequential growth. First question, year-on-year you're still down whatever it was 8%. Some of your peers are growing at this point. Why is the disconnect there? I mean, I'm thinking of SidePlay had a pretty significant year-on-year growth in their quarter. Are you guys not just investing aggressively enough on the marketing side, or maybe give a little bit of color on why we're still seeing negative year-on-year comps there? I guess maybe start with that question.

Yeah. I can't comment on what's in the revenue from others, especially those that you mentioned. I mean, clearly one of the focuses that we've had is to both grow in social casino, which is as you probably know is a fairly mature, flat industry overall, as well as layer on top new businesses that we would either enter organically or through acquisition. And so I think the first question in comparison would be with other companies is what's their social casino business versus other businesses that they may have more recently acquired. And that's the first comment. We also are very focused on continuing to manage and maintain our profitability, our EBITDA margins. And I think actually not inconsistent with what some of our peers have done but perhaps not all. We have decided not to be as aggressive in spending on the marketing side to acquire new users as we have seen CPIs increase and as a result our overall ROI related to acquiring new users fall. And so there's a balance between continuing to acquire new users and bringing those new users along as payers and not overspending as the cost of those users to go up.

No, fair enough. And I mean, in terms of the stabilization of social casino, I mean do you think now that we've kind of seen sequential growth this is something we should kind of continue to see it normalize in the quarters ahead coming post-pandemic, the normalization we've seen in terms of how people spend their time and their money, et cetera? Are we kind of getting to a more normalized environment in your view?

Well, I mean it's great that we were able to break the string of sequential declines from a quarterly revenue standpoint. Our focus is to grow from here, not just as a company but for overall revenue, but also for our casino business. We will obviously have to see how it goes. But certainly that’s our objective is to continue to grow our social casino business from here.

Fantastic. And I mean, look anybody that looks at your business can do some pretty simple calculations and realize how ridiculously cheap this stock appears to be. Is this an internal discussion among Board members of just about, kind of, how you're being valued relative to peers, relative to the market in general? Is this something that is on your radar? And I mentioned it, because I think I've said in the past, that you kind of get this the market-implied cost of equity is really high when you're trading at 3 times kind of net of cash. Is this something that is on your radar in terms of trying to resolve, or any color there would be fantastic. Thanks.

Sure, Jeff. Well, I would definitely reinforce the fact that we understand how low our valuation is. We believe that we are executing on the company's strategy to increase that valuation and we look forward to that happening. There is a recognition that that's important for us to do, no doubt.

Okay. Well fantastic. Congrats on the quarter, guys, and have a wonderful rest of your day. Thank you.

Thanks, Jeff.

One moment while we bring up our next question. And our next question comes from Aaron Lee with Macquarie. Aaron, go ahead.

HI, good afternoon. Thanks for taking my questions. I got dropped from the call, so I apologize if I missed this but understanding the pause in new game launches, how are you thinking about possibly investing to accelerate the internal development of new slot content or maybe striking partnerships for more third-party content? Thank you.

Thanks, Aaron. We spend a significant amount of our development resources on a combination of new content to refresh DoubleDown Casino as well as, we said in the remarks today, the parallel projects that we have going on in the new app area. And that includes apps that are – Well, especially includes apps that are not in the social casino category. And so we are working very hard with our resources in Seattle and Seoul in both those areas. Again, new content, meta-game features, et cetera, for DoubleDown Casino and then development of new apps. Parallel projects to develop new apps outside of social casino. To date, we haven't announced or haven't gone down the path of using third parties to assist in that process. We certainly aren't against that. We are able actually to do some potential work in leveraging our controlling shareholder WU, if we need to use their resources potentially if we find that makes sense for us, and we would definitely be willing to do that as well. We're open to other options beyond our own resources. But at this point, we're primarily focused on using the resources that we've built up in our studios in Seattle and in Seoul.

Got you. Awesome. Thank you. And congrats on nice progress this quarter.

Thanks, Aaron.

One moment for our next question. And our next question comes from Greg Gibas with Northland Securities.

Hi, good afternoon, Joe. Thanks for taking the questions. Sorry, if I missed this just jumping between a few calls, but did you discuss maybe more specifics on the timing of Super Nation closing?

We didn't provide specific details because it's not feasible at this stage. As you know, we need to secure regulatory approval from various regions in Europe. We are making good progress toward obtaining that approval. We are confident that we will receive approval in the coming months. However, we cannot predict an exact date or time. We are working diligently with our advisors to expedite the process as much as possible.

Okay. Fair enough. Yeah. I was just kind of referring to the expected to close later this year in the release. I just wanted to see if there was anything else but that's helpful. And one of...

And just to be clear, there's no real change there. I mean, it's inherently an uncertain timeline when you get started. And so we just keep plugging along.

Right. Understood. Great. And then wondering if you could just maybe discuss a little bit more of the specifics relating to the new features that you're adding to DoubleDown Casino?

Yeah, sure. So as you know, one of the most important things that we do as a social casino company is provide chips to players, both purchase chips as well as free chips that we give out. It's important for us to have players enjoy those and consume them as quickly as they can. So we are working on new features. I think IK mentioned some enhancements that we plan on rolling out here later this quarter on, for instance, our high-limit room and the structure of that and how that would work, because very much like jackpot features and other features that incentivize players to bet up with their virtual chips. As a result, they consume chips faster, and that's something that we're excited about providing to DoubleDown Casino users specifically.

Got it. Great. And then I guess lastly, I just wanted to follow up on anything within your control other than kind of the general trend of the social casino category. I wanted to get a sense of if there's anything you can maybe specifically do on the sales and marketing side, because I know it's been a little bit tougher on the return that you're seeing there. And also maybe just kind of how that return on sales and marketing has trended over the last several quarters? Is it improving, is it kind of staying the same, worsening? Just trying to get your high-level thoughts on that.

As I mentioned earlier, CPI costs are on the rise. Generally, we've noticed that the return on investment is not sufficient, especially with the increasing costs of acquiring new users. Our marketing team's focus is on identifying agencies and new advertising partners that can help us attract new players while aligning with our ROI targets. We are still investing significantly to acquire new users, but the escalating costs are making us cautious about overspending in sales and marketing. This trend is evident in our sales and marketing expenses over the past few quarters.

Got it. I appreciate the color. Congrats on the quarter, and I'll follow up offline. Thanks.

Okay. Thanks, Greg.

And at this time, I would like to turn the call over to Mr. Sigrist for some closing comments.

Great. Thank you, Sean, and thanks everybody for joining our call today and your continued interest in DoubleDown. We look forward to sharing future updates, as we continue to innovate and grow within both the social casino business and certainly the general mobile gaming arena. Thanks again. Have a great afternoon.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.